1986 PLP 208 (PTD)

SARDAR SAID MUHAMMAD KHAN, J.--This appeal by leave, has been directed against the order of the High Court, dated 24-12-1983 which was passed under section 136 of the Income-tax Ordinance, 1979. The brief facts giving rise to the present appeal are that the respondent who is carrying business as a construction firm of contractors filed return under the provision of Income-tax Act showing a loss, of Rs.2,05,825 during the assessment year 1976-77. The Income-tax Officer accepted the declared gross profit of Rs.19.78 and allowed the assessee a deduction amounting to Rs.3,48,070 on account of depreciation and thus determined the net loss at Rs.1,27;

825. The Inspecting Assistant Commissioner, in exercise of his powers under section 34-A of the Income-tax Act, 1922, issued a notice to the respondent on 14-4-1977, whereby tie expressed the opinion that the order of the Income-tax Officer was erroneous and was prejudicial to the Interest of the revenue; the Inspecting Assistant Commissioner Income-tax enumerated as many as ten grounds in the aforesaid notice which made basis for the view that the order of the Income-tax Officer was violative of law on the subject. The respondent, assessee; appeared in response to the aforesaid notice and submitted a written reply controverting the grounds which had prompted the Inspecting Assistant Commissioner to proceed under section 34-A of the Income-tax Act. A further query was made from the respondent by the Inspecting Assistant Commissioner, vide his order, dated 14-4-1977, whereby certain clarifications were sought from the assessee. Consequently, assessee submitted a written explanation on 10-11-1977. Afterwards, further opportunities of hearing were granted to the assessee by the inspecting Assistant Commissioner and finally he passed the order on 6-4-1980, rejecting the book version and applying a net profit rate of Rs.16% on the declared receipts of Rs.25,77,406; he determined the cost of the shuttering to the tune of Rs.6 lacs as against Rs.9,46,069, claimed by the assessee. The respondent filed an appeal to the income-tax Appellate Tribunal, which was partly accepted to the extent that the profit rate was reduced from 16% to 14%. However, the Tribunal maintained the finding of Inspecting Assistant Commissioner regarding the costs of shuttering for the purpose of depreciation. The respondent feeling aggrieved by the order of the Appellate Tribunal filed an application under section 136 (1) of the Income-tax Ordinance requiring the Tribunal to forward questions of law which in view of the respondent, had arisen out of the order of the Tribunal, but the said application was dismissed on the ground that no question of law could be said to have arisen out of the order passed by the Tribunal. Consequently, the respondent filed an application to the High Court under section 136(2) of the Income-tax Ordinance praying that the questions of law might be framed as prayed for by the respondent. The learned Judges of the High Court framed .the questions of law in the following form:- (i) That the order of the Inspecting Assistant Commissioner, dated 8th of April, 1980, was non-judicial, vague and arbitrary. (ii) That the Inspecting Assistant Commissioner was not justified to set aside the order of the Income-tax Officer who assessed the Income-tax of the petitioner. (iii) That the Inspecting Assistant Commissioner failed to confront the petitioner with the result of his Inquiry, so as to afford opportunity to the petitioner to meet issues and points found against him. (iv) That the petitioner was not confronted with the local inquiry alleged to have been made by the Inspecting Assistant Commissioner, during proceedings under section 34-A of the Act. (v) That Inspecting Assistant Commissioner was not empowered to set aside the order of Income-tax Officer, merely on account of his disagreement in the conclusion. Difference of opinion in assessment, was not a ground for interference in an order of Income-tax Officer. . (vi) That the Inspecting Assistant Commissioner travelled beyond the objections raised in the notice under section 34-A and thereby expressed opinion on the items not included In the said notice. Such items were mentioned as price of the fur wood (shuttering), (2) finding on the contact rates, (3) Mobilization of loan from the Bank; and (4) reference to escalation clause of the contract. (vii) That the Appellate Tribunal failed to apply its mind to the objections raised in the memorandum of appeal, as such refused to exercise the vested jurisdiction. The High Court decided only questions Nos. (i), (ii) (iii) (iv) (v) and (vii). The finding on question No. (vi) were not according to the subject-matter of the same. It may be observed that questions Nos. (i), (ii) and (vii) are not specific and have been framed in a general form; the decision on these questions does not resolve any specific point of law arising out of order of the Tribunal, whereas the requirement of law is that a question of law arising out of the order of the Appellate Tribunal must be given a specific form and should be decided accordingly. Questions Nos. 3 and 4 embrace identical subject- matter and appear to have been decided by the High Court jointly. A perusal of the judgment of the High Court reveals that the main ground on which the impugned order was passed Is based on the view that Inspecting Assistant Commissioner was not legally justified in initiating the proceedings In the case in hand under section 34-A merely on the ground that he differed with the finding of the Income-tax Officer and that the local inquiry alleged to have been made by the Inspecting Assistant Commissioner was not confronted to the respondent and as such he was not afforded an opportunity to meet the case against him. Before dealing with the findings of the Appellate Tribunal on the aforesaid points, it may be observed that under section 136(2) of the Income-tax Ordinance, if the High Court comes to the conclusion that the Appellate Tribunal has wrongly refused to refer the case to the High Court and in fact there were questions of law which had arisen out of the order of the Tribunal, it is Incumbent upon the High Court to frame those questions in specific form and give its findings thereon. Moreover, the High Court while exercising power under section 136 of the Income-tax Ordinance neither acts as a Court of appeal or revision; rather its jurisdiction is merely of an advisory nature. For the convenience sake, the relevant part of section 136 is reproduced as under:- "

136. Reference to High Court.--(1) Within ninety days of the date upon which he s served with notice of an order under section 135 the assessee or the Commissioner may, by application in such form, and accompanied by such documents as may be prescribed, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order, and the Appellate Tribunal shall, within ninety days of receipt of such application, draw up a statement of the case and refer it to the High Court. , (2) If, on an application made under subsection (1). the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the assesses or the Commissioner, as the case may be, may within one hundred and twenty days from the date on which he is served with notice of the refusal, apply to the High Court and that High Court may, if it is not satisfied with the correctness, of the decision of the Appellate Tribunal frame a question of law and the provisions of subsections (4). (5), (6) and (7) shall, so far as may be, apply as they apply to a reference made under subsection (1). (3) if the High Court is not satisfied that the statement in a case referred under subsection (1) is sufficient to enable it to determine the question' raised thereby, the Court may refer the case back to the Appellate Tribunal to make such modifications therein as the Court may direct. (5) ............................................... . (7) .................................................... (8) ................................... . (9) .................................................... It is evident from the abovementioned provision of law that the High Court has to apply its mind as to whether the questions suggested by the applicant are question of law arising out of the order of the Tribunal. In case the High Court comes to the conclusion that any question of law arises out of the order of the Tribunal, it shall frame that question in a specific form and give its finding on the same. It is not within the competence of the High Court to decide the matter as an Appellate Court and set aside the order of the Appellate Tribunal and restore the order of any subordinate Income-tax Authority. The High Court shall merely give its finding on the questions of law arising out of the order of the Tribunal and it is for the Appellate Tribunal to pass proper order in pursuance of the findings given by the High Court. However, the perusal of the judgment of the High Court, in the instant case, shows that the learned Judges after deciding the law points framed by them proceeded to quash the order of the Inspecting Assistant Commissioner and restore the order passed by the Income-tax Officer. Obviously, the High Court travelled beyond the scope of jurisdiction vested in it by virtue of section

136. Another aspect of the matter on which we deem it necessary to comment upon is that the High Court had to frame specific questions if any, on each of the law points arising out of the order of the Appellate Tribunal and the question of general nature such as questions Nos. (1). (ii) & (vii) are not stipulated under section 136 of, the income-tax Ordinance. For instance, the findings of the High Court on question No. (vii) that, some of the questions raised before the Appellate Tribunal had not been decided by the Tribunal and as such the Tribunal had failed to exercise the jurisdiction vested in if, is not of any avail to decide the matter In controversy. The matter would be resolved only if the questions of law are framed in specific form and findings of each of such questions is recorded by the High Court. It is only then the Appellate Tribunal would be able to pass any order in confirmity with the decision of the High Court as stipulated under subsection (5) of section

136. Coming to the merits of the case, first we propose to dispose of the preliminary objection raised by the learned counsel for the respondent to the effect that the appeal is incompetent because the Commissioner Income-tax who has filed the present appeal has not been legally appointed as such. According to the learned counsel, the Commissioner could only be appointed by the Board of Revenue under section 5 of the Income-tax Act, 1922, and not by the Government or any other authority. He has further argued that the Ordinance issued by the President of Azad Jammu and Kashmir, validating the appointment of the Income-tax Commissioner and other authorities and authorising them to continue to exercise their powers as before, is not valid because the relevant Ordinance promulgated by the President of Azad Jammu and Kashmir does not show that it was promulgated on the advice of the Azad Jammu and Kashmir Council, as stipulated under subsection (4) of section 41 of the Interim Constitution Act, 1974. The learned counsel has further contended that, In any case, the Ordinance could not be given retrospective effect and as it was promulgated during the pendency of the present appeal it should be ruled out of consideration so far as the question of the validity of the appeal in hand is concerned. We have given our earnest consideration to the matter and we are of the opinion that there is no substance in the contention raised by the learned counsel for the respondent. It may be observed that Income-tax Act, 1922, was adopted in Azad Kashmir by virtue of Act known as the Azad Jammu and Kashmir Adoptation of Laws Act, 1959. Under section 5 of the Income-tax Act, as adopted in Azad Kashmir, only the Azad Kashmir Government was competent to appoint Income-tax Commissioner and not any Revenue Board or any other authority. Subsection (2) of section 5 the Income-tax Act was amended in Pakistan by virtue of Ordinance XXXI of 196'2, whereby instead of Central Government the Central Board of Revenue was empowered to appoint Commissioner of Income-tax. It has not been shown that the aforesaid amendment was adopted in Azad Kashmir; rather the case of the respondent is that the Board of Revenue was constituted in Azad Kashmir somewhere in year 1979. It may be stated that by virtue of the Interim Constitution Act, 1974, the subject of Income-tax was placed on the Council's legislative list. Under section 49 of the Interim Constitution Act, persons employed in connection with the -affairs of the Council immediately before the commencement of the said Act were to continue until the position in respect of such persons is changed by an Act of the Council. Under section 51 of the aforesaid Constitution Act all the existing laws, rules and orders etc. immediately before the commencement of the said Act were to continue until and unless altered, repealed or amended by an Act of the appropriate authority. Thus, it is clear that appointment of Income-tax Commissioner or for that matter any other Income-tax authority was within the competence of the Azad Kashmir Government until and unless the existing law is substituted by an Act of the Council. So far as the Ordinance, known as the Income-tax Commissioner (Validation of Appointment and Exercise of Powers)' Ordinance, 1984, is concerned that has been given retrospective effect from the first day of September, 1976. Under subsection (1) of section 2, the appointment of any person as, and the authorisation of any person to exercise, or to continue to exercise the powers and jurisdiction of Commissioner Income-tax etc. would be deemed to have been made by the competent authority. Obviously, the ambiguity, if any, has been removed by the aforesaid Ordinance end the provisions of the Ordinance would operate against any inconsistent provision contained in the Income-tax Act of 1922 or Income-tax Ordinance, 1979, or any other 1aw for the times being in force as has been stipulated in the preamble of the Ordinance. Thus, any contrary provision in section 6 of the Income-tax Act or any other law would be deemed to have been impliedly repealed so far as that relates to the appointment of the, Commissioner Income-tax or any Income-tax Authority. The learned counsel has also argued that the Ordinance could be issued only on the advice of the Chairman of the Council, as visualised in subsection (4) of section 41 of the Interim Constitution Act, but ix does not appear to have been Issued on any such advice. The perusal of the Ordinance (latest being the Ordinance No. CCXVI of 1985, promulgated on 22nd October, 1985, shows that the Ordinance has been promulgated in pursuance of powers vested in the President ok Azad Jammu and Kashmir under subsection (4) of section 41 of the Interim Constitution Act, it Implies that the Ordinance was issued In pursuance of the advice of the Chairman of the Council because subsection (4) of section 41 says that it shall be Issued on such an advice; and further more an official act would be presumed to have been performed regularly. Thus, there is no force in the contention that the Ordinance was not promulgated an the advice of the Chairman of the Council. The learned counsel for the respondent has also argued that the Ordinance in question could not be given retrospective effect and the instant appeal should be decided Irrespective of the provisions of the Ordinance, because the same was promulgated during, the pendency of the appeal. He has cited Mien Rafi-ud-Din v. Chief Settlement and Rehabilitation Commissioner P' L D 1971 S C 252 Malik Mir Hassan and another v. The State P L D 1969 Lah. 786 and Referring Authority/Chief Secretary v. Sikandar Hayat Khan P L D 1982 S C (A.J.K.) 112 in support of his contention. A perusal of the aforesaid authorities would show that it has nowhere been held that the legislature is not competent to legislate retrospectively. The principle enunciated in the aforesaid authorities is that law shall be presumed to operate prospectively unless it has been given retrospective effect by the legislature. As the Ordinance in question has been expressly given retrospective effect, the authorities cited by the learned counsel for the respondent are distinguishable and have no application to the case in hand. In the aforesaid view of, the matter finding no force in the preliminary objection raised by the leaned counsel for the respondent, it is hereby repelled. On the merits of the appeal, it has been submitted by the learned counsel for the appellant that the High Court has erred In putting a narrow construction on the scope of section 34-A of the Income-tax Act, under which the Inspecting Assistant Commissioner initiated the proceedings. It has been argued that it was not a case in which Inspecting Assistant Commissioner had no material before him to proceed under the aforesaid provision of law; it has been urged that numerous grounds have been spelled out in the notice issued by the Inspecting Assistant Commissioner which are Indicative of the fact that Income-tax Officer not only violated the relevant provisions of Income-tax Law but also failed to enquire into the truth or otherwise of the book version putforth by the respondents. The learned counsel while dealing with the scope of section 34-A has referred the following authorities in support of his contention: - In the case reported as The Commissioner of Income-tax, Lahore Zone v. M. Iqbal Saigol P L D 1976 Lah. 547, discussing the scope of revisional powers of the Inspecting Assistant Commissioner it was held as under: - "On a plain reading of section 34-A of the Act there is no express bar imposed on the powers of the Inspecting Assistant Commissioner that he cannot interfere unless the mistake in the order under revision is apparent from the record. Indeed under this section he is vested with a very wide power to call for and examine the record of any proceeding under the Act. After examination of the record if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interest of the revenue; he may take cognizance of the case in revision. At this initial stage of the case even before any notice is issued to the assessee he is required to make up his mind on an altogether subjective consideration. But there is nothing in this section to warrant the conclusion that at that state of the case he must confine himself solely to the examination of the record of the Income-tax Officer called by him or in other words in deciding to entertain the revision he is not permitted to rely on any other material or information not forming part of the record. Any such narrow interpretation on the opening part of subsection (1) of this section is bound to unnecessarily curtail the power of superintendence and control vested in the Inspecting Assistant Commissioner to sit in revision against the order passed by the Income-tax Officer. This power is liable to be rendered almost nugatory and meaningless if indeed its exercise is confirmed only to the correction of errors on the face of the record. It is expressly laid down in this section that the Inspecting Assistant Commissioner may, after notice to the assesses, and after making, or causing to be made such inquiry as he may deem necessary, pass such order as the circumstances of the case may justify. This in itself implies that his inquiry in revision is not necessarily confined to the rectification of mistakes apparent on the face of the record. By all means in the course of his inquiry he can even go behind the record if he finds if necessary so to do." In Additional Commissioner of Income-tax, Gujrat v. Mukur Corporation ((1975) III I T R 312, it was held that: - "The words 'prejudicial to the interests of the revenue' In section 263 of the Income-tax Act have not been defined but they must mean that the orders of assessment challenged are such as are not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. In the present case, It was obvious that the Income-tax Officer had committed an error in not making Inquiry into the details as regards both the deductions and also that want of such enquiry had resulted in prejudicial to the interest of the revenue. To this extent, the initiation of action under section 263 by the Commissioner was quite proper." In reply the learned counsel for the respondent has cited the case reported as Gangs Properties v. Income-tax Officer 1978 I.T.R.

447. The facts of the case were that the Income-tax officer accepted the consideration of the sale declared by the' petitioner subject to the report of Valuation Officer. Subsequently, the Valuation Officer submitted a report whereby he determined higher valuation. The revision proceedings stated by the Commissioner on the basis of Valuation Officer's report were held to be without jurisdiction on the ground that as the said report was not in existence at the time when the assessment was made by the Income-tax Officer and did not form part of the record before him, it could not be taken into consideration by the Commissioner for the purpose of invoking the jurisdiction under section 263(1) of the Income-tax Act. It has been further observed that the words used in the section are "is erroneous" and not the words "has become subsequently erroneous". However, it was opined that it was only after the proceedings had been lawfully initiated by the Commissioner on the basis of original record that the Commissioner could take into consideration any material which might come into existence later on In view of expression "after making or causing to be made such inquiry as he deems necessary". It is evident from the abovementioned case, cited by the learned counsel for the respondent that it does not deal with the proposition regarding the scope of section 34-A in general. The question which needed to be resolved in that case was as to whether the report .of the Income-tax Inspector, which was not in existence at the time of the initiation of the proceedings under section 34-A of the Act, could be made basis for initiating proceedings under the said Act. In the instant case, however, the Inspecting Assistant Commissioner issued notice on the basis of material, which was in possession of the Income-tax Officer at the time of making the order of assessment and it cannot be said, that, for the initiation of the proceedings, he acted upon material, which was not before the Income-tax Officer at the relevant time. The Legislature never intended a arrow interpretation of section 34-A of the Income-tax Act, otherwise it would have clearly expressed its intention by employing appropriate phraseology in the relevant provision. If, prima facie, there is material which satisfies the Inspecting Assistant Commissioner that the order passed by the Income-tax Officer Is erroneous and is thus prejudicial to the revenue of the State, he Is fully empowered to Initiate the proceedings under section 34-A and to embark upon the inquiry envisaged under the aforesaid provision, of course, the power of revision which vests in the Inspecting Assistant Commissioner should be exercised sparingly and for sufficient reasons but it does not mean that undue restrictions, other than those stipulated in the relevant provisions, should be imposed on the exercise of the said power. Once the order of Income-tax Officer is found erroneous in fact or law and prejudicial to the revenue, the Inspecting Assistant Commissioner is competent to invoke his powers of revision to rectify the wrong. In the instant case, the Inspecting Assistant Commissioner had spelled out sound reasons for being dissatisfied with the order of the Income-tax Officer. Thus, the findings of the High Court that the Inspecting Assistant Commissioner had no jurisdiction to initiate proceedings merely because he differed with the view of the Income-tax Officer is not sustainable in law. We are in respectful agreement with the principle enunciated in the above mentioned authorities cited by the learned counsel for the appellant and hold that in the instant case there were sufficient reasons for Inspecting Assistant Commissioner to initiate the proceedings under section 34-A of the Income-tax Act. Now, the next question, which needs to be resolved is as to whether the findings of the Inspecting Assistant Commissioner stand vitiated because the result of local inquiry allegedly conducted by him was not confronted or communicated to the respondent. The learned counsel for the respondent has taken great pains to persuade us that as it has been recorded in the order of the Inspecting Assistant Commissioner that he had conducted a local inquiry, the material collected as a result of the said inquiry should have been communicated to the respondent to give him an opportunity to rebut the same, if he so desired. He has argued that as the respondent was not confronted with the material collected as a result of loal Inquiry, the finding of the Inspecting Assistant Commissioner or for that matter the Appellate Tribunal stand vitiated. He has referred following authorities in support of his contention: - Messrs Muhammad Anwar and Muhammad Iqbal Bros. Ltd. v. Income-tax Appellate Tribunal 1959 P T D 149; Commissioner of Income Tax (Central) Culcutta v. Daulat Ram Rawatmull (1973) 87 I T R 87, 349; Shahid Hameed v. Income-tax Officer Lahore and another 1976 P T D 347; Dayaram Surajmal v. Commissioner of Income-tax, Hyderabad and Andhra 1960 P T D 349; M.O. Thomakutty v. Commissioner of Income-tax Travancorecochin and Mysore, Bangalore 1959 P T D 201; M/s. Swamin Bors Alleppey v. The Commissioner of Income-tax 1959 P T D 51 and Superior Furniture Company v. Commissioner of Income-tax 1967 -P T D

261. A perusal of the aforesaid authorities would show that if the result of local inquiry or the material collected as a result of such inquiry is to use against the assessee that must be communicated to him, so as to enable him to explain his position and rebut any such material if he so chooses. It has been observed In the aforesaid cases that although there is no legal obligation for the Income-tax officer to communicate such material to the assessee under the Income-tax Act, yet, in the interest of justice, the same should be communicated to the assessee so as to afford him an opportunity to rebut such material, if he so desires. It may be observed here that the principle of confrontation of the material collected during a private or local Inquiry is emphasised only where such material is Intended to be used against the assessee and where such material constitute sole or principal evidence against him. In case where the material collected as a result of private inquiry, is not used against the assessee and the conclusion has been drawn or can be supported by other independent material on the record the order of the concerned authority would not be vitiated merely because the result of local Inquiry was not confronted to the person concerned. It has been argued by the learned counsel for the respondent that when a conclusion is drawn on the basis of the material collected as a result of local inquiry and also on the basis of other independent material, It may not be possible to assess as to how much weight was given by the authority concerned to the Independent evidence and how much influence was caused by the result of the local inquiry, not communicated to the assessee; as such the order must vitiate. He has relied on a case reported as Commissioner of Income-tax (Central), Culcutta v. Daulat Ram Rawatmull (1973) 87 I T R

349. It has been held in the aforesaid case that there should be some direct nexus between the conclusion of fact arrived at by the authority concerned and the primary facts upon which, that conclusion is based. The use of extraneous and irrelevant material in arriving at that conclusion would vitiate the conclusion of fact because it is difficult to predicate as to what extent the extraneous and irrelevant material has influenced the authority in arriving at the conclusion. It was further opined that when a Court of fact acts on material partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the Court was affected by the irrelevant material used by it in arriving at its finding, therefore, a finding is vitiated because of the use of inadmissible material. The learned counsel for the appellant, in reply, has contended that in the instant case only a casual reference has been made to the local inquiry in the order passed by the Inspecting Assistant Commissioner and no material collected as a result of such inquiry has been made basis for the order. He has drawn our attention to the relevant part of the order passed by the Inspecting Assistant Commissioner and has contended that the conclusion arrived at by the Inspecting Assistant Commissioner is based on other independent evidence and not on the material collected as a result of local inquiry. He has also contended that even if it is shown that the Inspecting Assistant Commissioner has acted on any material alleged to have been collected as a result of local inquiry, it can be ruled out of consideration and the order of Commissioner being sustainable on the other independent evidence would not be vitiated. He has cited case reported as Seth Gurmukh Singh and another v. Commissioner of Income-tax, Punjab (1944) 12 I T R 393, wherein it has been held that the Income-tax Officer is not debarred from relying on private sources of information, which sources he may not disclose to the assesses at all. But, in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate the assesses the substance of the Information so proposed to be utilised as to put the assess in possession of full particulars of the case. It was further opined that it is not open to the High Court in a reference under section 66 of the Income-tax Act to declare the finding of fact arrived at by the Income-tax authorities as altogether vitiated, if there is any admissible material to support the finding quite apart from the result of the confidential inquiries made by him and not communicated to the assessee. Coming to the instant case, it may be observed that the reference to local inquiry in the order of Inspecting Assistant Commissioner is merely of a casual nature and no material collected in the local inquiry was made basis for the conclusion drawn by him. We are of the view that casual reference to the local inquiry in the order of the Inspecting Assistant Commissioner does not justify the inference that the conclusion drawn by the Inspecting Assistant Commissioner was based on the material, which was not confronted to the assessee. We further venture to add that in cases where the conclusion is based on admissible as well as on inadmissible evidence or relevant as well as Irrelevant material, the High Court should not interfere with the order of the Appellate Tribunal if after excluding the inadmissible evidence or irrelevant material, there is still sufficient evidence to support the finding of the Tribunal. Of course, the cases in which Inadmissible evidence or irrelevant material constitutes the bulk of evidence in support of the order passed by the Appellate Tribunal, the High Court may in such cases hold the order of the Appellate Tribunal to have vitiated. After thoroughly considering the facts of the case in hand, we hardly find any force in the contention that as the result of the local inquiry was not confronted to the assessee, the order of the Inspecting Assistant Commissioner or for that matter of the Appellate Tribunal stands vitiated. This is so because the orders of the Inspecting Assistant Commissioner and the Appellate Tribunal are based upon independent material and not on the result of the local Inquiry. Next, it may be observed that while dealing with the subject -matter of question No. (vi) the High Court has opined that as some of the facts which were not mentioned in the notice under section 34-A were later on considered and made basis for order passed by the Inspecting Assistant Commissioner, the order of the Inspecting Assistant Commissioner is biased. We are afraid such a finding is not only beyond the subject-matter of the aforesaid question but is not sustainable in view of the provision contained in section 34-A of the Income-tax Act. Under the aforesaid provision, after initiating the proceedings, the Inspecting Assistant Commissioner is supposed to hold an inquiry with regard to the relevant matters and thus it cannot be said that no further material would be revealed as a result of such inquiry. The purpose of inquiry stipulated under section 34-A is to ascertain the truth or otherwise of the fact as to whether the order of the Income-tax Officer is erroneous and is prejudicial to the revenue of the State. Any material which would come to light as a result of the aforesaid inquiry can be validly used against the assesses and it would be paradoxical to suggest that, the material which was not even in the knowledge of the Inspecting Assistant Commissioner at the time of the issuance of the notice under section 34.eA should have been mentioned in the notice. We have already held that subsequent to the initial, notice under section 34-A, the assesses-respondent was given adequate opportunity to meet the case against him and he also submitted written explanation in response to the query made by the Inspecting Assistant Commissioner. Thus, no case of violation of the principle of audi alteram partem has been made out... The learned counsel for the respondent has argued that he had suggested many other questions of law which had arisen out of the order of the Appellate Tribunal but those have not been framed by the High Court and no finding has been recorded in that regard He has contended that the said points were also raised before the Appellate Tribunal but the same were not decided and thus it was incumbent upon the High Court to frame specific question on the said law points and give Its finding on the same, as visualised under the relevant provisions of the Income-tax Ordinance. It is correct that respondents have not filed any cross-appeal but the fact remains that some of the points raised in the reference application read with the statement of law filed by the respondent does not appear to have been considered by the High Court. Therefore, in absence of any finding of the High Court on the said points it is not possible for us to decide the same one way or the other. In the light of what has been stated above we accept the appeal, set aside the impugned order of the High Court and remand the case to the High Court with the direction that it shall reconsider as to whether any more questions of law, other than those already decided, arise out of the order of the Appellate Tribunal and if it comes to the conclusion that any such questions arise out of the order of the Appellate Tribunal, it shall frame the same and give its finding on those according to law. The copy of this judgment shall be sent to the Registrar Appellate Tribunal forthwith. M. Y.H. Appeal accepted.